As Pakistan tries to regain its foothold in the world export market, the global export scenario is undergoing a drastic disruption. Suddenly it is not cheap labour that the manufacturers are looking for but smart labour, well-versed in new tech skills, automation, AI.
According to Susan Lund, James Manyika, and Michael Spence (The Global Economy's Next Winners-published in Foreign Affairs' July/August 2019 edition), the greater complexity of modern goods means that research, design, and maintenance are coming to matter more than production. There is going to be hardly any demand for low value addition textile and leather goods that we produce currently.
Policy planners in Pakistan need to read all these new trends in developed countries, where skilled workforce, large quantities of capital, huge customer bases, and dense clusters of high-tech companies are combining to power modern economies.
Trade is said to be becoming more concentrated in specific regions, particularly within Europe and Asia. That is partly the result of greater domestic demand from emerging-market countries, but it is also being driven by the increased importance of speed. Proximity to consumers is said to allow companies to respond faster to changing demand and new trends. Many companies are creating regional supply chains near each of their major markets.
Adidas, for example, has built fully automated "Speedfactories" to produce new shoes in Germany and the United States rather than making them in its traditional locations in Indonesia. Zara has pioneered the "fast fashion" industry, refreshing its store merchandise twice a week. More than half of the company's thousands of suppliers are concentrated in Morocco, Portugal, Spain, and Turkey, where they can serve the European and US markets. Zara can get new designs from the drawing board to a store in Manhattan in just 25 days. Pakistan needs to look around, survey and find its own kind of Zara to enhance export of fashion goods.
The growth of new technologies, such as Internet connectivity and artificial intelligence (AI), are also said to be changing trade patterns. From 2005 to 2017, the amount of data flowing across borders every second grew by a factor of 148. The availability of cheap, fast digital communication has boosted trade.
E-commerce platforms allow buyers and sellers to find each other more easily. In Pakistan we need to attract PayPal to ensure safety and reliability of payment for boosting e-commerce. We also need ideal navigating and search systems catering to 2-3 million product database from 100-150 online stores. A new startup named, 'Shoppingum' launched in Pakistan recently is said to come very close to a reasonable mass of products.
The Internet of Things-everyday products with Internet connections-lets companies track shipments around the world and monitor their supply chains.
The rise of automation means companies don't have to worry as much about the cost of labor when choosing where to invest. In recent decades, companies are said to have sought out low-paid workers, even if that meant building long, complex supply chains. That is no longer the dominant model: today, only 18 percent of the overall trade in goods involves exports from a low-wage country to a high-wage one. Other factors, such as access to resources, the speed at which firms can get their products to consumers, and the skills available in the workforce, are more important.
Therefore, companies are said to be building fully automated factories to make textiles, clothes, shoes, and toys-the labour-intensive goods that gave China and other developing countries their start in global manufacturing. Exports from low-wage countries to high-wage countries fell from 55 percent of all exports of those kinds of cheap, labour-intensive goods in 2007 to 43 percent in 2017.
For decades, manufacturing firms made physical things. Today, that is no longer a given. Some multinational companies, including Apple and many pharmaceutical manufacturers, are said to have turned themselves into "virtual manufacturers"-companies that design, market, and distribute but rely on contractors to churn out the actual product.
The growth in trade in services is, in the meanwhile, said to be providing another boost for advanced economies. The United States, Europe, and other advanced economies together already run an annual surplus in trade in services of almost $480 billion, twice as high as a decade ago, demonstrating their competitive advantage in these industries. New technology will let companies remotely deliver more services, such as education and health care. Countries that already specialize in exporting services, such as France, Sweden, the United Kingdom, and the United States, are said to be in a good position to capitalize on these trends.
Homegrown companies in Brazil, China, and other middle-income countries are also said to be branching out into higher-value-added industries, such as supercomputing, aerospace, and solar panel manufacturing, and relying less on imported parts from the developed world. Chinese companies are said to be beginning to manufacture the computer chips they used to buy from abroad. (Although for smartphones, China still imports chips.)
China's total annual imports of intermediate goods from Germany for vehicles, machines, and other sophisticated products peaked in 2014 at $44 billion; by 2017, the figure was $37 billion. Japan and South Korea have also seen their exports of intermediate goods to China in those industries decline. The Made in China 2025 initiative aims to build the country's strengths in cutting-edge areas such as AI, 5G wireless systems, and robotics.
A number of middle-income countries are seen to enjoy a fixed advantage: geographic proximity to major consumer markets in advanced economies. As automation makes labor costs less important, many multinational companies are choosing to build new factories not in countries with the lowest wages but in countries that are closer to their main consumer markets and that still offer lower wages than rich countries. Mexico fits the bill for the United States; Morocco, Turkey, and eastern European countries do the same for western European countries, as do Malaysia and Thailand for richer Asian countries, such as Japan and the wealthier parts of China.
To quote directly from the above mentioned article (The Global Economy's Next Winners), other middle-income countries are poised to benefit from the shift from goods to services. Costa Rica, for example, is now a major exporter of business services, such as data entry, analytics, and information technology support. Its exports in those sectors have grown at an average annual rate of 34 percent over the last ten years, and they are worth $4.5 billion today, or 7.6 percent of Costa Rica's GDP. The global annual trade in outsourced business services-everything from accounting to customer support-totals $270 billion and growing. That represents a lucrative opportunity for middle-income countries such as Costa Rica.
"Yet since AI tools could handle much of the work involved in these services, workers will need to be able to assist customers with more complex troubleshooting or sales if they are to stay ahead of the machines.
"Whether services can drive the kind of rapid growth in early stage developing countries that manufacturing once did remains to be seen. Some low-income countries, such as Ghana, India, and the Philippines, have thriving service industries catering to businesses around the world. But even in those countries, the services-export sector employs few people and contributes little to GDP.
"Like middle-income countries, low-income ones will need to shift to higher-value activities to stay ahead of automation. Tradable services, such as transportation, finance, and business services, enjoy high productivity growth and can raise living standards.
"Technology may enable some people in low-income economies to jump ahead in economic development without retracing the paths taken by those in advanced economies. Internet access allows workers everywhere to use online freelance platforms, such as UpWork, Fiverr, and Samasource, to earn supplemental income. A large share of the freelancers on these platforms are in developing countries. Khan Academy and Coursera teach languages and other skills. Google Translate is removing language barriers. Kiva and Kickstarter help aspiring entrepreneurs fund their start-ups. And telemedicine services make better health care available to people in remote places. But using those services requires widespread access to affordable high-speed Internet.
"Countries need to invest in digital infrastructure and education if they are to succeed in a global digital economy. Although many countries have achieved near-universal primary schooling, getting students to complete secondary school and making sure they receive a high-quality education when there are the next hurdles."
Comments
Comments are closed.